531 B.R. 814
Bankr. N.D. Cal.2015Background
- Howrey LLP dissolved in 2011 after partners left and the firm collapsed.
- Eight law firms hired former Howrey partners to represent former Howrey clients, creating post-dissolution matters and potential profits for those firms.
- The trustee sued the eight firms to recover profits from work on client matters taken by ex-partners.
- Bankruptcy court held: post-dissolution profits could be pursued as fraudulent transfers and misappropriated unfinished business; pre-dissolution profits could be pursued via unjust enrichment.
- DC Court of Appeals has not directly addressed whether client matters are partnership property; the court looked to other jurisdictions for guidance.
- Court holds that post-dissolution matters are presumptively new matters not belonging to Howrey and that pre-dissolution unjust enrichment claims fail; motions to dismiss granted with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Post-dissolution profits belong to the dissolved firm? | trustee contends profits are Howrey property under unfinished business. | firms argue new, third-party matters not subject to partnership property. | Yes; post-dissolution claims dismissed. |
| Pre-dissolution unjust enrichment viable? | trustee seeks recovery where Howrey conferred benefits via pre-dissolution matters. | unjust enrichment requires plaintiff confer benefit; no such benefit by Howrey. | No; pre-dissolution unjust enrichment claims dismissed. |
Key Cases Cited
- Beckman v. Farmer, 579 A.2d 618 (D.C. 1990) (unfinished business rule limits; continuity of engagement matters)
- Young v. Delaney, 647 A.2d 784 (D.C. 1994) (continuation of business; client matters may be assets; context-specific)
- In re Thelen LLP, 24 N.Y.3d 16 (N.Y. 2014) (client matters belong to client, not firm; not partnership property)
- Heller Ehrman LLP v. Davis, Wright, Tremaine, LLP, 527 B.R. 24 (N.D. Cal. 2014) (unfinished business doctrine not broad enough to justify claims)
- Thelen LLP, 762 F.3d 157, 762 F.3d 157 (9th Cir. 2014) (federal appellate view aligning with Thelen interpretation)
- News World Communications, Inc. v. Thompsen, 878 A.2d 1218 (D.C. 2005) (unjust enrichment elements; plaintiff must confer benefit)